Here’s everything you need to know about Bitcoin ETFs debuting this Thursday, January 11.
What is a spot Bitcoin ETF?
A spot Bitcoin ETF (Exchange Traded Fund) is a type of financial product that reproduces the current price, or “spot”, of bitcoin.
Investors buy shares of ETFs instead of investing directly in bitcoin. The ETF buys and holds “physical” bitcoin and shares closely track the value of bitcoin.
Like stocks, these shares are traded on traditional stock markets, making them accessible to a wide range of investors.
ETFs are regulated financial products that offer a much safer investment framework than exchanges like FTX…
The main advantage of an ETF is that it avoids the technical difficulties associated with purchasing and keeping bitcoins on a personal wallet. Perfect for boomers only interested in its appreciation.
Who are the pioneering investment funds?
The SEC has validated 11 ETFs. Bitwise will have the lowest management fee at 0.2%. Here is the full list of approved ETFs:
-Bitwise (BITB): 0.2%
-ARK 21Shares (ARKB): 0.21%
-Fidelity Wise Origin (FBTC): 0.25%
-Wisdomtree (BTCW): 0.30%
-Invesco Galaxy (BTCO): 0.39%
-Valkyrie (BRRR): 0.49%
-iShares (IBIT): 0.25%
-VanEck (HODL): 0.25% (who also applied for an ethereum ETF)
-Franklin (EZBC): 0.29%
-Hashdesh (DEFI): 0.9%
-Grayscale (GBTC): 1.5%
On which exchanges will ETFs evolve?
NYSE:
- Bitwise
- Hashdesh
- Grayscale
CBOE:
- ARK 21Shares
- Fidelity Wise Origin
- Wisdomtree
- Invesco Galaxy
- VanEck
- Franklin
NASDAQ:
- Valkyrie
- iShares
Who will keep the bitcoins?
8 of the 11 providers will use the Coinbase exchange. Coinbase reportedly already holds 1 million BTC on behalf of its users, including 620,000 BTC from the former Grayscale Trust (GBTC).
Fidelity is the only fund that will use its own custody service. Well done. Vaneck will use the Gemini exchange while Hashdesh will use BitGo.
Coinbase:
- Bitwise
- ARK 21Shares
- Wisdomtree
- Invesco Galaxy
- Valkyrie Bitcoin
- iShares
- Franklin
- Grayscale
Here is BlackRock’s commercial for its ETF for Anglophiles:
“Cash” or “in-kind”?
In the world of ETFs, we use the terms “in-kind” and “cash” redemption. They designate the methods by which investors can sell their shares of the ETF.
-In-kind
In this case, the investor receives the underlying asset. For example, if the ETF holds bitcoins, the investor receives the bitcoins as payment.
This way of doing things is mainly used by institutional investors. It is advantageous because it avoids selling the underlying asset, which could have an impact on the market and result in capital gains tax.
-Cash
In this case, investors receive an amount equivalent to the value of their shares in cash. This method triggers capital gains tax.
Cash redemptions may be simpler for the average investor who prefers to receive cash rather than a basket of securities.
In the case of spot bitcoin ETFs, the SEC did not want to authorize the in-kind method.
Let’s end with “Not your key, not your bitcoin”! Bitcoin is not just a store of value. It is also an uncensorable payment network.
Having your own private keys means you can lose them in a boat accident. Or use it anonymously as part of a circular economy. Or to keep in check those who have the idea of using CBDCs to control our lives.
In addition, there are no management fees when you hold your bitcoins yourself.
Hold your key!
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